What is the probability of default in year 1

Assignment Help Financial Econometrics

Reference no: EM131240167

The 1-, 2-, 3-, 4-, and 5-year CDS spreads are 100, 120, 135, 145, and 152 basis points, respectively.

The risk-free rate is 3% for all maturities, the recovery rate is 35%, and payments are quarterly.

Use DerivaGem to calculate the continuously compounded hazard rate each year. What is the probability of default in year 1? What is the probability of default in year 2?

Reference no: EM131240167

Questions Cloud

Federal electronic surveillance law : 1. Explain the significance of the division between "content" and "non-content" as it relates to federal electronic surveillance law. 2. Why have warrantless searches of passenger bags in the New York Subway have been allowed by the courts?

Determining the potential customers : ABC Inc. wants to build a new web site to sell their "clearance" products and they are planning to publish a proposed website site designed to obtain feedback from "potential customers".

What do think prospects are of successfully rehabilitating : Compare and contrast the characteristics of a serial murderer, spree murderer, and mass murderer. Using web resources, provide a criminal example of each one and discuss the motivations behind the crime(s). Are the motivations similar or different..

Compensate for the inequities in marksmanship skills : To compensate for the inequities in their marksmanship skills, the three decided that they would fire in turns, starting with Aaron, followed by Bob, and then by Charlie. The cycle would repeat until there was one man standing, and that man would..

What is the probability of default in year 1 : Use DerivaGem to calculate the continuously compounded hazard rate each year. - What is the probability of default in year 1?

Write the contrapositive for each of the following statement : If n is prime, then n is not divisible by any prime number between 1 and √n inclusive. (Assume that n is a fixed integer that is greater than 1.)

How would use differential analysis to arrive at decision : Discuss the relevant costs you would consider for this decision as well as irrelevant costs and sunk costs. How would you use differential analysis to arrive at this decision?

Calculate a hazard rate consistent with the spread : Given Table shows the five-year iTraxx index was 77 basis points on January 31, 2008. - calculate a hazard rate consistent with the spread.

Assessment of the risk management and security issues : Child Protection board has considered your assessment of the risk management and security issues for the data file exchange and payroll services proposed. They have decided that they need an additional assessment on the technical management and th..

User Account

All Pages